John Charcol senior technical manager Ray Boulger said: “The rate of interest used to calculate the amount of this benefit has been left unchanged at just over 6% during the period of steep interest rate falls over the past 2 years. This has been very nice for those receiving this benefit, and their lenders, because as mortgage rates have fallen the amount paid by the government has progressively exceeded the actual interest charged to most borrowers and the surplus has been credited to borrowers’ accounts and used to pay off arrears or repay capital.”
He continued that this distortion of the system had been overdue for correction.
“It may be that in the past when there was a much smaller variation in most mortgage rates than is the case today the saving in administration achieved by using a single interest rate to calculate the benefit outweighed the cost of making individual calculations based on the actual rate people are paying,” he said.
I trust that “re-adjusting” the amount of this payment is code for making the scheme fairer by linking the amount of benefit to the actual amount of mortgage interest claimants are being charged.
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